How to Experiment with Value Pricing
August 12, 2014
So how much is it going to cost me?
I had just launched my accounting practice and was ready to show the world what debits and credits were truly made of. Yet while I had a wealth of accounting experience, I had never sent an invoice. The most commonly asked questions in business would leave me stammering in an effort to figure out how to respond.
It was only after having that conversation time and time again when I realized that pricing is in fact a skill just as much as my debits and credits were. If I became a good accountant through my years of experience, I’d need to do the same to become good pricing.
If you’ve ever thought, “how much should I charge for this customer?” when asked about cost, you’re likely practicing some form of value pricing. While it’s a component, value pricing is not just about giving a fixed price to a customer—the idea is to think about the value of your service to the individual you’re serving.
So just how do you determine what the value of your service is? There’s really only one way—experiment. Here are 5 ways that you can experiment to learn how customers perceive your service and ultimately provide them with a good price.
Do your homework properly
The only way you can truly price for value is by learning about your prospective customer. Whether it’s one phone call or a series of meetings, doing your homework means asking questions and active listening. Ask what their pain points are and listen to why they are looking for your type of service. If it’s a website they’re after, whether they expect that website to increase their customer base or just display their store hours is going to significantly affect the value of the website to them. Experiment with a few different questions to see which ones give you the most insight.
Once you have an understanding of what the value of your service may be to your prospective customer, give them some options to choose from. By offering 3 levels of service, you are letting your customer decide on the service that provides them with the most value. You can then experiment with the packages by offering additional services such as warranties, on-going support, etc. to get a feel for what your customers are truly looking for.
Price out of your comfort zone
It’s easy to talk yourself into offering a lower price. After all, you want the business. However, if you never price outside of your comfort zone, you’ll never know how much people truly value your service. In fact, sometimes customers are lost by pricing too low, associating the low price with a lower level of service. By pricing one of your packages a bit out of your comfort zone, you can gauge how much your service is really worth.
Present your pricing
Pricing is a very human experience. Customers will sense if you believe in your service and stand behind your price. Only if you present your pricing then will you be able to determine how well you’ve priced. You’ll be able to note if a customer hesitates or if they don’t blink an eye—all cues that let you know their comfort level with your pricing. While it’s tempting to shoot a quote through email, you’ll risk losing all that valuable information we learn from human interaction. Experiment with your presentation techniques and you may learn a lot about your customer.
If you’ve built up a loyal customer base and you’re making money, why change? Well, there may be customers out there that are better suited to your service that you may be missing out on. If all you offer are basic men’s hair cuts for $20, but you’re really good at styling, perhaps there are customers out there willing to pay $50 for a cut with styling? The only way to get better at value pricing then is by constantly tweaking your pricing and service offering based on what you learn about your customer base. Opening yourself up to change will allow you to get closer to serving your best customers.
More great ideas to grow your business
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